What is crowdfunding for nonprofits? Should our nonprofit use crowd funding platforms?

Raising money for any social cause or nonprofit project can be a challenge. Your organization may want to explore some newer funding options. We have already discussed Fast Pitch competitions as one opportunity to raise funds in a quick manner. Since there are many benefits to crowdfunding, we encourage your nonprofit or social venture to learn more.

What is crowdfunding for nonprofits?

Crowdfunding is the collection of finances from contributors, usually online, to fund an project, cause, or initiative. It has become a powerful tool across the social sector.

Crowdfunding relies on users capitalizing on social media to generate interest in their projects.

What are benefits of crowdfunding?

The benefits of crowdfunding go beyond the funds raised. It provides connection to audiences who care about your cause. Richard Branson cites the following benefits:

market validation

access to new investors

promotion

community exposure, and

real-time feedback.

We find that audience support helps strong projects rise to the top.

What are some crowdfunding platforms?

Kickstarter: Any organization or individual can use to finance their event or project (more below).

Indiegogo: An international crowdfunding site for creative types that can also be used to raise money for charity and non-profit organizations (more below).

Razoo: Individuals and organizations have used Razoo to create more than 100,000 fundraising websites and to give over $400M to the causes they care about.

Causes: Causes is a place to discover, support and organize campaigns, fundraisers, and petitions around the issues that impact communities.

StartSomeGood: StartSomeGood is international and supports all types of entities – for-profits, nonprofits, individuals. They support once-off projects as well as ongoing ventures.

Crowdrise: Fundraising site for various projects, such as medical bills, volunteer trips, causes, and over 1.5 million charities.

Rockethub.com: A crowdfunding platform used by all types of organizations and individuals ranging from scientists to philanthropists.

How should your organization get started with a crowdfunding campaign?

SSIR shares that “You can launch a campaign at any stage of your work, whether you are starting a new organization or expanding existing programs, but it is important to put time and effort into the campaign and to set attainable goals.

Running a successful campaign takes a lot of preparation. Nonprofits can do their homework by:

Speaking to other nonprofits that have run successful crowdfunding campaigns

Putting together a draft campaign and sharing it with the teams at crowdfunding organizations to get feedback before going live.” Read more from SSIR.

Details on Kickstarter

Kickstarter is a website that allows users to post creative projects in an effort to secure funding from individuals. Kickstarter only allows for users to post creative projects that meet the following guidelines:

Funding for creative projects only. A project has a clear goal, like making an album, a book, or a work of art. A project will eventually be completed, and something will be produced by it. A project is not open-ended. Starting a business, for example, does not qualify as a project.

No charity or cause funding. Examples of prohibited use include raising money for the Red Cross, funding an awareness campaign, funding a scholarship, or donating a portion of funds raised on Kickstarter to a charity or cause.

No “fund my life” projects. Examples include projects to pay tuition or bills, go on vacation, or buy a new camera.

If your project meets the guidelines, you create a project page that includes a fundraising goal and a deadline for donating (must be less than 60 days). Your project must raise the total amount of funding you were seeking by the deadline in order for you to receive the money. The idea is that your project will only be able to succeed with the appropriate amount of money. The all-or-nothing approach is meant to prevent the project creator from having to complete a project with fewer resources than necessary.

Kickstarter also encourages project creators to offer creative rewards to donors to aid in soliciting funds. Rewards can be anything from being included in the credits to being a part of the project.

While it is free to post a project, if your project is funded, Kickstarter receives 5% of the funds raised.

More about Indiegogo

Indiegogo is another type of crowdfunding site. While similar to Kickstarter, Indiegogo is different in that users can solicit funding for a variety of campaigns and are not limited to creative projects. Indiegogo is commited to creating positive change. Postings range from raising funds to produce a film to raising funds for a specific individual’s medical treatment.

How does it work at Indiegogo?

Users create a page for the funding campaign. Like Kickstarter, users are encouraged to offer incentives for campaign contributers. Individuals donate using PayPal. Indiegogo allows users to choose between two funding types.

Fixed funding is the same concept as Kickstarter’s all-or-nothing funding model. If a campaign does not meet its funding goal, contributers are refunded. If a fixed funding campaign meets its goal, then Indiegogo receives 4% of the total.

The other option, flexible funding, allows the user to keep any money raised. However, Indiegogo receives 9% of funds raised and the user is charged an additional 3% for credit card processing.

What should my nonprofit consider before launching a crowdfunding campaign?

Not all projects posted will meet their goal. A little over half of all projects on Kickstarter meet their fundraising goal. Before posting a project consider the following factors:

Does my initiative have a clear purpose and goal?

Your project’s page needs to be able to speak on your project. The purpose of your initiative should be clear to any individual who visits your page. Your goal should also be defined clearly.

Does my nonprofit have the ability to promote our initiative?

Having a compelling project is only the beginning. Once you created a page for your project, you have to promote it via social media sites. A nonprofit with an active social media presence will have an easier time promoting than a nonprofit with a limited presence. You must also consider if you have a staff member who can dedicate time to monitoring your project’s progress and to promote the campaign for donations.

What incentives can we offer contributors?

Both Kickstarter and Indiegogo recommend offering some type of reward for contributing. Consider what you can offer to donors. Nonprofits should find a way to further connect their contributors to the work of the organization.

Have you become familiar with the website’s guidelines?

Before creating a page, make sure you understand your obligations as a user. Does your project fit the guidelines? Are you clear on what is prohibited and what is allowed? Do you understand how payments are processed?

Each of the crowdfunding sites have step-by-step instructions on utilizing their sites. Be sure to go through them and understand them before your page goes live.

About Mollie Cullinane

Mollie Cullinane is an attorney who works with nonprofits and social enterprises, from emerging local charities, professional athletes' foundations, and international organizations. She is a Texas Super Lawyer – Nonprofit Law (Thomson Reuters, 2012 - 2014). She also serves as a professor at Texas Lutheran University, teaching “Social Entrepreneurship and Nonprofits." LEARN MORE